Investment Firms Are Courting YouTube Creators
Investment companies looking for the next big revenue stream have taken notice of the second-most popular social media platform in the world, namely YouTube. Jellysmack, a company that works with YouTube creators to help them expand onto new platforms, is reaching out to the owners of the most popular YouTube channels with offers to license their older content.
Jellysmack’s new program aims to collect YouTube ad revenue by licensing the back catalogs of “experienced” YouTube creators for up to five years. According to the company, creators won’t forfeit any equity in their brands, intellectual property, or future projects. Spotter Inc. and Keli Network Inc. are two other companies with comparable business models that are also looking to capitalize on YouTube ad revenue from older videos.
How Do YouTuber Creators Make Money?
Creators whose channels have been approved for the YouTube Partner Program are compensated when viewers watch YouTube ads on their channel. YouTube takes a 45% cut of what the advertiser pays for placement on each ad that runs on a specific channel, and the remaining 55% goes to the creator. This can be an especially profitable opportunity for YouTube channels with millions of subscribers. For example, it is estimated that Logan Paul, who has over 20 million subscribers on his primary channel, earns around $20 million per year. According to recent reports, YouTube’s worldwide advertising revenues were $7.07 billion the third quarter of 2022 alone. And what is now a thriving creator industry has generated a flurry of startups offering everything from business software to financial services for online personalities.
YouTube Creators Are Making Millions Of Dollars From Licensing Deals
Investment firms searching for the next big source of income have noticed the enormous potential of YouTube channel advertising streams and are now offering cash payments in exchange for future advertising revenue generated by a YouTube creator’s archive of videos, with agreements lasting up to five years.
Spotter and Jellysmack, firms that assist YouTube creators in expanding their businesses and gaining access to the tools necessary for scale-up success, are currently two of the major players in these deals. Spotter announced earlier this year that it planned to invest $1 billion by the middle of 2023, while Jellysmack said it has set aside $500 million for deals of a similar nature. SoftBank Group Corp.’s Vision Fund made investments in both businesses, wagering that as YouTube stars draw bigger audiences, the value of the videos would rise.
YouTube creators who are offered these deals are frequently already under pressure to expand their businesses into other markets. They are now under increased pressure to understand the contractual requirements of the deals, some of which are reported to be worth more than $2 million and commonly include requirements such as uploading a certain number of videos per month as well as other marketing obligations.
The lack of transparency regarding calculations and the risks of breaching agreements is the main concern among creators, as has been observed with many other deals in the entertainment industry. Investment firms contend though that they rarely need to enforce contract terms and that they are continuing to enhance their financial offerings with both Jellysmack and Spotter marketing their funding as less risky and less demanding than other types of funding alternatives.
